One of the biggest challenges facing the global economy in 2022 is the soaring prices of energy and electricity. The biggest factor in this increase was Russia's invasion of Ukraine and ensuing sanctions which caused oil prices to climb from $90 per barrel to $130. However, prices have eased in recent months as it became clear that Russian oil would continue to make its way into global markets.

The invasion also had disastrous secondary effects, specifically as European reliance on Russian natural gas meant that there were shortages and soaring electricity prices. This led to a boom in U.S. natural gas exports and a revival of coal and nuclear.

While Europe has felt the most pain, it's also had an impact on U.S. consumers, especially in more rural areas, where gasoline makes up a higher portion of discretionary spending. It's also had a negative impact on the political fortunes of the current administration. It's also contributed to the Federal Reserve's hawkish policies and aggressive hikes which have depressed activity in the housing market, and many believe will lead to a recession in 2023.

The Biden Administration has sought to fight these inflationary forces with its most notable move being the sales of the strategic petroleum reserve (SPR). In total, it sold more than 100 million barrels, and this, in combination with China's economy continuing to run below capacity and a slowing global economy, were sufficient enough for oil prices to meaningfully decline.

Now, the Biden Administration announced its plan to refill the SPR. Essentially, it will buy futures contracts at around $70 per barrel, in essence, creating a floor and giving more certainty to producers about future prices.

So far, producers have been hesitant to aggressively increase production despite higher prices. They don't want to repeat the mistakes of the past decade when many aggressively invested in new production just as oil embarked on a bear market.

The market reaction was instantaneous as oil stocks climbed higher, but there was a negative reaction in alternatives like natural gas and coal as increased oil production in future years undercuts demand for alternatives. Additionally, higher levels of production also mean that the odds of another supply-side crisis also are meaningfully lower.